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Articles To Help Your Business
BOOKKEEPING TIPS is a twice monthly e-letter published by The American Institute
of Professional Bookkeepers (AIPB), Suite 500, 6001 Montrose Road, Rockville, MD 20852.
Tel.: 800-622-0121, Fax: 800-541-0066, email: info@aipb.org. By Dec. 31, 2004 Do not apply the EITC to wages paid after this date unless the employee has give you a new W-5. Paychecks dated 2005 are 2005 wages, even if earned in 2004. Year-End Questions and Answers Q. An employee was married in November, 2004. Do I issue a W-2 in her married name or in her maiden name? A. Do not change her name until she shows you a copy of her Social Security card with her married name on it. Q. How do we tax wages v. a partner’s draw? A. Withhold employment taxes on wages, but not on a draw (not even FIT). Q. On a 1099-MISC, do we put the person’s name or DBA? A. If people work for themselves, use the individual's name and Social Security number. If the person is an employee of the business, use the business name and federal EIN. Q. Can we report part-time employee wages on a 1099-MISC? A. Report employee wages on a W-2 ¾ never on a 1099-Misc. Q. Do we report a $1,000 gift to an employee on a 1099-MISC? A. Report cash payments to employees on a W-2 as income, not on a 1099. Q. Are per diem reimbursements wages subject to FIT, FITW, FICA, and FUTA? A. Per diem reimbursements for travel are not wages—if the travel is properly substantiated (for time, place and business purpose) and the amount does not exceed the maximum federal rates for the location of travel. Room tax above the federal rate may be reimbursed separately and is nontaxable if receipts are provided. Q. How do we complete Form 941 as a common pay agent? A. Report the agent’s name and EIN (as registered with the IRS) on the 941. Consolidate the wages and taxes of all employers represented by the common pay agent and report the consolidated totals on the 941. Q. How do I spread our Christmas bonuses over the year so they don’t throw off December’s income statement? A. Most companies accrue for the bonuses by taking an estimated amount and dividing this amount by the number of pay periods in the year (usually 24, 26 or 52). Q. Are paychecks mailed on Dec. 31, 2004, still treated as 2004 wages? A. Under the rule of constructive receipt, the employee did not have access to the money until the checks were delivered in 2005, so these are 2005 wages. Q. Should I ask employees to complete a new W-4 each year? A. Employees need not complete a new W-4 unless they claimed exempt from FIT withholding the prior year, or changed marital status or number of personal exemptions. Q. How do we report third-party sick pay on a W-2? A. The amounts to report are provided by the third party. Enter federal taxable sick pay in Box 1, third-party FIT withheld in Box 2, sick pay subject to Social Security tax in Box 3, Social Security withheld by the third party in Box 4, sick pay subject to Medicare in Box 5, and Medicare withheld by the third party in Box 6. Enter the amount of sick pay exempt from FIT in Box 13 with Code “J.” Q. Should I reconcile my W-2, W-3 and 941 totals? A. Yes, do the reconciliation every year end before employees receive their W-2 copies. Q. Can an unsubstantiated auto allowance be reported on a Form 1099-MISC? A. If an employer gives an auto allowance unrelated to actual vehicle expenses incurred and does not require the employee to substantiate or return unused amounts, the entire allowance is wages and is reported on the W-2, not the 1099. Q. What do I do about an employee’s incorrect W-2 if copies have not gone to the SSA? A. Tell the employee about the error and that you will provide another W-2 (not W-2c) to file with his/her1040. Include the new W-2 with the W-2s and W-3 sent to the SSA. -------------------------------------------------------------------------------- |
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11 Mar 2008
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